Undoubtedly, a credit card is a great convenience today. However, people often restrict themselves from increasing their credit card limit to prevent excessive spending. They fear that if they overspend, they may be unable to clear the pending balance. Well, that’s not true in all cases. Increasing the credit limit can have several upsides if the credit card is managed wisely.
What exactly is Credit Limit?
A credit limit is the maximum amount people can borrow from a bank using their credit card. Credit card companies decide on this limit based on a few factors, such as the customer’s credit history and income potential. The other factors that impact the credit card limit are:
- Ongoing loans and their Equated Monthly Instalments (EMIs)
- Hard inquiries with the other bank
- Existing portfolio with the issuing bank
This limit is revised periodically by the banks and credit card agencies at the customer’s request or on their own. Thus, having a good credit record is of utmost importance for increasing the credit limit.
Benefits of Increasing Credit Card Limit
A high credit limit is considered synonymous with a high overdraft balance but has several beneficial expansions to it as well. The increased credit card limit brings more value to the customer’s credibility and affordability.
– It makes it easier to avail of loans in future.
With a high credit card limit, a person can easily get various loans at the lowest possible interest rates. Thus, the higher credit limit and timely payment of credit dues increase the approval chances of personal, education, car, or other forms of loans in the future. Furthermore, a high credit card limit is an indicator of the strong credibility of the person. Thus, it reduces the formalities required for availing loan otherwise.
– Lowers the credit utilisation
The credit scoring model of credit rating agencies considers the amount of credit used out of the total amount of credit available. As a result, this defines the risk level of the customer. A lower credit card leads to an amount exhausting soon and thus impacts the credit score. Thus, increasing the credit card limit helps to lower credit utilisation and improve credit scores.
– Provides strong support during financial emergency
Often people run short of liquid funds and find it challenging to arrange such funds externally. Thus, an increased credit card limit can prove to be a game-changer in such cases. The need for money arising from unexpected events, such as medical emergencies, can be managed effectively with a high credit card limit. Thus, a credit card with an adequate limit never makes you feel stuck.
– Ensures better access to discounts and rewards
A credit card with a high limit certainly allows customers to earn higher credit card reward points. These reward points are used for shopping, travelling, dining, and availing of lucrative discounts and deals on credit card purchases. Furthermore, credit cards reward cardholders for smaller transactions like groceries, shopping, gas, etc. As a result, credit cards are suitable for all forms of expenses today.
– Eliminate the need for multiple cards
Generally, one credit card with a high credit limit is a better option than multiple credit cards with lower limits. Too many credit cards mean too many credentials, and too many credentials mean more chances of confusion & security threat. Thus, one credit card with an adequate limit reduces the mental and manual job of maintaining too many credit accounts.
– Making high-value purchases convenient
Generally, people see a credit card as the means to meet their high-end needs and apply for credit cards accordingly. Besides facilitating high-end purchases, most credit card companies provide extended warranties, price protection, and coverage for specific damages or theft. Thus, a credit card with a high limit is never a loss deal for the person willing to make large purchases. Furthermore, requesting the respective credit card company can increase the credit limit.
Tips for Increasing the Credit Card Limit
Requesting an increase in credit card limit is a right of most credit cardholders. However, the request undergoes several scrutinies concerning past credit performance. Thus, some tips to ensure that a request for a credit limit extension is easily approved are:
- Pay the credit card dues regularly, without any delay.
- Wait for the increase in the income source
- Consider increasing security for secured credit cards
- Check the credit score quite often to fix credit discrepancies at the earliest.
- Try and opt for the balance transfer option.
Increasing the credit card limit is the best way to use credit cards to the fullest. However, maintaining a stable credit history and understanding the amount of credit limit needed is equally essential to be eligible for a credit limit extension. Furthermore, increasing the credit card limit makes people more cautious about tracking their credit transactions frequently and avoiding extravagance.